A Taxpayers' Bill of Rights is Probably Coming to Your State – Lessons Learned from Colorado
Taxpayers’ Bills of Rights (TABORs) prevent state governments from increasing taxes or spending revenue growth without first obtaining voter approval. Several states are poised to adopt state TABORs in the near future. The State of Colorado adopted a TABOR in 1992. There are a number of lessons that other states can learn from Colorado’s TABOR experiment.
Colorado’s TABOR was enacted as an amendment to the Colorado Constitution. Essentially the amendment prohibits the Colorado Legislature from increasing state or local taxes without first obtaining approval of the Colorado voters. Colorado’s TABOR also limits the amount of revenue growth that the state can retain and spend to the sum of inflation plus population growth. Revenue growth in excess of that sum must be refunded to taxpayers via tax refunds; however, the Legislature has the right to ask the voters to approve spending surplus revenues. Moreover, Colorado's TABOR provides that when tax revenues decline the government's spending limit must decline accordingly.
Generally the Colorado voters have not approved an increase in taxes or the spending of surplus revenues since the TABOR was enacted, although until recently they had never really needed to. Colorado’s economy performed fairly well from the time that the TABOR was enacted up until the technology bubble in the late 90's and the national recession that began in late 2001. These economic downturns have reduced the state's tax revenues, which has caused the state's spending limit to decline. Simultaneously, the state has had to increase spending on state-mandated public education and federally-mandated Medicaid programs -- both of which will continue to require increased spending in the future. The end result is that Colorado is now facing the perplexing situation of having an estimated $234 million budget deficit and at the same time, due to the TABOR, having to refund an estimated $345 million to taxpayers (too bad the State of Colorado can’t simply print more money!).
So where does this leave the State of Colorado? Basically it leaves the state government in the position of having to repeal or modify the TABOR. It is probably safe to say that Colorado’s politicians will not be able convince Coloradoans to repeal the TABOR. Colorado voters, like the voters in any other state, would be very unlikely to repeal any Constitutional amendment that grants them the right to write their own tax bill and to limit the amount of money that the government can spend. The fact that the TABOR is a Constitutional amendment, rather than just a state statute, makes it even more unlikely that the TABOR will be repealed. If that is not enough to secure the TABOR's future, the fact that many of the politicians currently serving in Colorado, including the current governor, were integral to the enactment of Colorado's TABOR should do the trick. So absent a miracle or a disaster, Colorado's TABOR will likely remain on the books.
This leaves Colorado politicians in the position of having to modify the TABOR -- a position that could end political careers. The governor has proposed the most widely cited modification. The governor's proposal is to allow the government to keep the prior years spending level even though the year's tax revenues have declined. Other proposals include various modifications that would allow the legislature to temporarily ignore the TABOR. The implication of the governor's proposal and of most of the other proposed modifications is that the government will end up spending more money regardless of the TABOR. This process is strikingly similar to how the U.S. Congress set aside its own spending reform legislation.
So where do Coloradoans stand on this issue? It appears that most Coloradoans have not paid much attention to the issue. Others appear to only be concerned by the issue to the extent that the political talk has interrupted their favorite television programs. This apathy should be expected given the nature of the debate. Essentially the debate has been limited to Democrats citing how Colorado is in a state of decline as a result of the reduced government spending and the Republicans touting how the government will have to reign in its spending as a result of the TABOR. This limited debate may be partially attributable to Colorado politicians not wanting to remind voters that they designed and supported the TABOR. The resulting debate is just too predictable to draw any real interest from the citizenry.
There are a number of lessons that other states can learn from Colorado’s TABOR experiment, such as:
Colorado’s TABOR was enacted as an amendment to the Colorado Constitution. Essentially the amendment prohibits the Colorado Legislature from increasing state or local taxes without first obtaining approval of the Colorado voters. Colorado’s TABOR also limits the amount of revenue growth that the state can retain and spend to the sum of inflation plus population growth. Revenue growth in excess of that sum must be refunded to taxpayers via tax refunds; however, the Legislature has the right to ask the voters to approve spending surplus revenues. Moreover, Colorado's TABOR provides that when tax revenues decline the government's spending limit must decline accordingly.
Generally the Colorado voters have not approved an increase in taxes or the spending of surplus revenues since the TABOR was enacted, although until recently they had never really needed to. Colorado’s economy performed fairly well from the time that the TABOR was enacted up until the technology bubble in the late 90's and the national recession that began in late 2001. These economic downturns have reduced the state's tax revenues, which has caused the state's spending limit to decline. Simultaneously, the state has had to increase spending on state-mandated public education and federally-mandated Medicaid programs -- both of which will continue to require increased spending in the future. The end result is that Colorado is now facing the perplexing situation of having an estimated $234 million budget deficit and at the same time, due to the TABOR, having to refund an estimated $345 million to taxpayers (too bad the State of Colorado can’t simply print more money!).
So where does this leave the State of Colorado? Basically it leaves the state government in the position of having to repeal or modify the TABOR. It is probably safe to say that Colorado’s politicians will not be able convince Coloradoans to repeal the TABOR. Colorado voters, like the voters in any other state, would be very unlikely to repeal any Constitutional amendment that grants them the right to write their own tax bill and to limit the amount of money that the government can spend. The fact that the TABOR is a Constitutional amendment, rather than just a state statute, makes it even more unlikely that the TABOR will be repealed. If that is not enough to secure the TABOR's future, the fact that many of the politicians currently serving in Colorado, including the current governor, were integral to the enactment of Colorado's TABOR should do the trick. So absent a miracle or a disaster, Colorado's TABOR will likely remain on the books.
This leaves Colorado politicians in the position of having to modify the TABOR -- a position that could end political careers. The governor has proposed the most widely cited modification. The governor's proposal is to allow the government to keep the prior years spending level even though the year's tax revenues have declined. Other proposals include various modifications that would allow the legislature to temporarily ignore the TABOR. The implication of the governor's proposal and of most of the other proposed modifications is that the government will end up spending more money regardless of the TABOR. This process is strikingly similar to how the U.S. Congress set aside its own spending reform legislation.
So where do Coloradoans stand on this issue? It appears that most Coloradoans have not paid much attention to the issue. Others appear to only be concerned by the issue to the extent that the political talk has interrupted their favorite television programs. This apathy should be expected given the nature of the debate. Essentially the debate has been limited to Democrats citing how Colorado is in a state of decline as a result of the reduced government spending and the Republicans touting how the government will have to reign in its spending as a result of the TABOR. This limited debate may be partially attributable to Colorado politicians not wanting to remind voters that they designed and supported the TABOR. The resulting debate is just too predictable to draw any real interest from the citizenry.
There are a number of lessons that other states can learn from Colorado’s TABOR experiment, such as:
- Voters really don’t care how much money the government spends so long as the economy remains strong, their taxes remain low, the government benefits that they and their family receive are not affected, and the whole process does not interrupt their favorite television programs.
- A Constitutional amendment for a TABOR will be irrevocable once enacted, forcing all future economic debates to be confined to proposing ideas to modify the TABOR. Considering that many citizens are not interested in state politics now, narrowing the scope of future debates in this manner would only serve to alienate citizens further. Even in the states in which the voters have historically been interested in state politics, such as California (remember Proposition 13?), a TABOR will narrow the debate so much that even most of those voters will lose interest (leaving only a small cadre of voters who are highly involved and highly upset).
- Any such legislation would not prevent state governments from exceeding their spending limit or from withholding taxpayer refunds. If your state government wants to spend more money or keep tax refunds then that is what it will do. The only impact of such legislation would be to doom voters to having to hear proposals to modify the TABOR in any year in which the state undergoes an economic recession or the state government decides it wants to spend more money.
- If Republicans have the majority control of your state and they enact such legislation it will signal that Republicans expect to lose majority control of your state government, because such a measure would probably represent a last ditch effort to impose spending limits on a Democrat controlled government.
- If Republicans hope to enact such legislation in your state then they should do so during an economic boom, rather than during or immediately following a recession. Moreover, if the legislation is enacted, the individual politicians who supported the legislation should keep alternative career options open just in case the state subsequently undergoes an economic recession and/or the state government decides to spend more money.
 
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